credit union

credit union,

cooperative, not-for-profit financial institution that makes low-interest personal loans to its members. It is usually composed of persons from the same occupational group or the same local community or institution. Funds for lending come from the sale of shares to members and from the members' savings deposits. Cooperative banking originated in Germany in the middle of the 19th cent.; it was developed by Hermann Schulze-DelitzschSchulze-Delitzsch, Hermann, 1808–83, German liberal politician and economic reformer. Believing in economic self-help by cooperative associations, he founded peoples' banks, mercantile and consumers' cooperatives, and, in 1859, a general association of German cooperatives......Click the link for more information. and later was particularly adapted to rural communities by F. W. RaiffeisenRaiffeisen, Friedrich Wilhelm, 1818–88, German leader in the cooperative movement. Between 1845 and 1865 he was mayor of several German towns. After the agricultural crisis of 1846–47 Raiffeisen came to the conclusion that the chief need of the people was for credit......Click the link for more information.. In the United States, the Credit Union National Association (founded 1934) has been instrumental in organizing credit unions. Credit unions are important because they provide loans to blue-collar workers and small farmers, who would otherwise have difficulty securing credit at reasonable interest rates. Under provisions of the Credit Union Act of 1934, U.S. credit unions are chartered by their respective states or by the federal government.

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Credit Union

a cooperative that unites small commodity producers and production and office workers to create a public monetary fund to meet their requirements for small-scale credit (production or consumer credit).

The financial resources of a credit union are formed by shares and membership fees and interest on loans, bank credits, state grants, and income from loan issues, which are usually guaranteed by the government. The credit unions are divided into urban unions, uniting artisans, small merchants, and production and office workers, and rural unions, uniting peasants, craftsmen, and fishermen. Credit unions may specialize in loans, savings, or risk guarantees, but the majority combine all these operations.

Credit unions originated under capitalism. The banks gave credit to large and middle capitalists, but the petite bourgeoisie was forced to seek private credit from usurers, paying sky-high interest rates and often selling themselves into virtual bondage. In order to free themselves from the usurers and to meet their financial obligations, the petit bourgeois began to unite in credit unions. The first credit unions appeared in Germany in the 1840’s and 1850’s and then spread to other Western European countries and to America and Asia. The first credit cooperative in Russia was founded in 1865.

Under imperialism in the developed capitalist nations, particularly the USA, France, the Federal Republic of Germany, Italy, and Japan, peasants, city artisans, small merchants, and production and office workers have united in credit unions to obtain short-term and long-term credits for production, consumption, and housing construction. The national centers of credit unions in capitalist countries are closely connected with private, joint-stock, and state banks and are a component of the capitalist credit and banking system.

In the socialist countries the credit unions were used during the transition from capitalism to socialism as a form of the struggle against capitalist elements and also as a way of assisting the poor and middle peasants to get credit and of crediting all kinds of working and agricultural cooperatives. In the USSR credit unions existed from 1917 to 1931, except during “war communism.” Credit unions were active in many other socialist countries, including Bulgaria until 1951, Czechoslovakia until 1952, the Mongolian People’s Republic until 1965, the People’s Democratic Republic of Korea until 1958, and the People’s Republic of China until January 1959. In the early 1970’s, credit unions existed in Poland, Hungary, the German Democratic Republic, the Democratic Republic of Vietnam, Rumania, and Cuba.

Credit unions are widely known in the developing countries. In India the government supports the credit unions to fight usurious capital. Credit unions exist in Turkey, Pakistan, Malaysia, Thailand, Ghana, Nigeria, Tanzania, Cameroon, Mauritius, and elsewhere.

In the socialist-leaning developing countries credit unions are used by the state as a key factor in noncapitalist economic development.

Marie Desmarais-Santi, a policy and planning officer with FedNor, says the loan loss reserve agreement is FedNor's latest initiative aimed at generating new business in Northern Ontario, and that a similar arrangement has been made with Caisse Populaire, another Northern Ontario banking group.

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